HB 2063 — An Act establishing clean fuels standards; establishing the Clean Fuels Standards Board; imposing duties on the Clean Fuels Standards Board and the Department of Environmental Protection; and establishing the Fair Market Credit Trading Program.

PRINTER'S NO.   2647

                    THE GENERAL ASSEMBLY OF PENNSYLVANIA



                        HOUSE BILL
                        No. 2063
                                                 Session of
                                                   2025

     INTRODUCED BY TAKAC, MIHALEK, HILL-EVANS, SANCHEZ, STEELE,
        VITALI, MAYES, RIVERA, CEPEDA-FREYTIZ, FRANKEL, E. NELSON,
        PASHINSKI, BOROWSKI, FLEMING, HADDOCK, MALAGARI AND BRENNAN,
        NOVEMBER 21, 2025

     REFERRED TO COMMITTEE ON ENERGY, DECEMBER 3, 2025


                                     AN ACT
 1   Establishing clean fuels standards; establishing the Clean Fuels
 2      Standards Board; imposing duties on the Clean Fuels Standards
 3      Board and the Department of Environmental Protection; and
 4      establishing the Fair Market Credit Trading Program.
 5                              TABLE OF CONTENTS
 6   Chapter 1.   Preliminary Provisions
 7   Section 101.   Short title.
 8   Section 102.   Findings and declarations.
 9   Section 103.   Definitions.
10   Chapter 3.   Clean Fuels Standards Board
11   Section 301.   Establishment.
12   Section 302.   Composition.
13   Section 303.   Terms.
14   Section 304.   Officers.
15   Section 305.   Quorum and voting.
16   Section 306.   Vacancies.
17   Section 307.   Compensation and expenses.
18   Section 308.   Proceedings.
 1   Section 309.    Transparency.
 2   Section 310.    Powers and duties.
 3   Chapter 5.   Standards
 4   Section 501.    Transportation fuels.
 5   Section 502.    Heating fuels.
 6   Section 503.    Implementation.
 7   Section 504.    GREET model and carbon intensity.
 8   Section 505.    Exemptions and eligibility.
 9   Chapter 7.   Fair Market Credit Trading Program
10   Section 701.    Establishment.
11   Section 702.    Components.
12   Section 703.    Participation.
13   Chapter 9.   Miscellaneous Provisions
14   Section 901.    Rulemaking.
15   Section 902.    Reports.
16   Section 903.    Co-compliance.
17   Section 904.    Compliance waiver.
18   Section 905.    Preemption.
19   Section 906.    Effective date.
20      The General Assembly of the Commonwealth of Pennsylvania
21   hereby enacts as follows:
22                                   CHAPTER 1
23                            PRELIMINARY PROVISIONS
24   Section 101.    Short title.
25      This act shall be known and may be cited as the Clean Fuels
26   Standards Act.
27   Section 102.    Findings and declarations.
28      The General Assembly finds and declares as follows:
29          (1)     According to the most recent Greenhouse Gas
30      Inventory issued by the department, the transportation sector

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 1      and heating fuel sector are the second and third largest
 2      sources of greenhouse gas emissions in this Commonwealth.
 3          (2)     Through the development and implementation of clean
 4      fuels standards for transportation fuel and heating fuel,
 5      this act is intended to:
 6                (i)    Reduce greenhouse gas emissions from the
 7          transportation sector and heating fuel sector.
 8                (ii)    Incentivize production of clean fuels for the
 9          transportation and heating fuel sectors within this
10          Commonwealth through a system of credits, which can be
11          sold through private transactions to entities that are
12          required to reduce the carbon intensity of transportation
13          fuels and heating fuels supplied to and used in this
14          Commonwealth.
15          (3)     This act is intended to be technology neutral and
16      not to exclude any clean fuel or any specific type of
17      transportation fuel or heating fuel.
18          (4)     Implementation of clean fuels standards will
19      increase the optionality of available transportation fuels
20      and heating fuels in this Commonwealth and increase overall
21      fuel resilience and grid reliability.
22   Section 103.    Definitions.
23      The following words and phrases when used in this act shall
24   have the meanings given to them in this section unless the
25   context clearly indicates otherwise:
26      "Agricultural co-product."     A secondary or incidental product
27   derived from the processing or use of an agricultural product,
28   including, but not limited to, plant residue, animal waste,
29   distiller's grains, oilseed meal or another material suitable
30   for conversion to transportation fuel or heating fuel.

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 1      "Agricultural products."     Crops, livestock or other farm-
 2   based commodities that are grown, raised, harvested or produced
 3   for use as food, feed, fiber, fuel or industrial raw material or
 4   other materials suitable for conversion to transportation or
 5   heating fuel.
 6      "ASTM."     The American Society for Testing and Materials
 7   International.
 8      "Board."     The Clean Fuels Standards Board established under
 9   section 301.
10      "Carbon dioxide equivalent."     A unit of measurement that is
11   used to standardize the effects of various greenhouse gases and
12   is calculated using Equation A-1 in 40 CFR Pt. 98 Subpt. A
13   (relating to general provision). Carbon dioxide equivalent may
14   be stated as CO2e.
15      "Carbon intensity."     The life cycle emissions per unit of
16   fuel energy expressed in grams of carbon dioxide equivalent per
17   megajoule, supplied to and used in this Commonwealth, as
18   calculated under the GREET model adopted by the board.
19      "Carbon intensity target."     The carbon intensity value for a
20   given compliance year that is used to calculate the credits and
21   deficits accrued by a program participant as set by the clean
22   fuels standard.
23      "Clean fuel."     A fuel sold or supplied for use in this
24   Commonwealth that has a carbon intensity below the clean fuels
25   standards as established by the board, including, but not
26   limited to:
27          (1)     Electricity generated from alternative energy
28      sources, as defined in section 2 of the act of November 30,
29      2004 (P.L.1672, No.213), known as the Alternative Energy
30      Portfolio Standards Act, and in accordance with the act of

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 1      April 9, 1929 (P.L.177, No.175), known as The Administrative
 2      Code of 1929.
 3           (2)    Renewable natural gas, including, but not limited
 4      to, biogas derived from landfill gas, municipal solid waste,
 5      industrial and food waste, wastewater treatment material,
 6      waste mine methane, agricultural products, agricultural co-
 7      products and animal manure.
 8           (3)    Renewable propane.
 9           (4)    Hydrogen.
10           (5)    Hythane.
11           (6)    Liquid fuels, including, but not limited to, liquid
12      fuels derived from agricultural products and agricultural co-
13      products such as biodiesel, renewable diesel, ethanol and
14      renewable gasoline.
15           (7)    Any of the fuels enumerated under paragraph (6) and
16      generated from co-processing with petroleum-based fuels.
17      "Clean fuels standard."     The schedule of carbon intensity
18   targets to which a program participant must abide, in accordance
19   with:
20           (1)    Section 501(b) for transportation fuels.
21           (2)    Section 502(b) for heating fuels.
22      "Compliance year."      The period beginning January 1 and ending
23   December 31 of the same year.
24      "Credit."    As follows:
25           (1)    A quantitative measure of the amount of CO2e that a
26      fuel supplier produced below the carbon intensity target in a
27      given compliance year.
28           (2)    A credit shall be expressed in metric tons of CO2e.
29           (3)    For a fuel with a carbon intensity below the
30      applicable carbon intensity target, a credit shall be

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 1      calculated by multiplying the difference between the
 2      applicable carbon intensity target of the fuel in a given
 3      compliance year and the carbon intensity of the fuel and the
 4      amount in megajoules of that fuel used in this Commonwealth.
 5      "Credit generator."   A fuel supplier that generates credits
 6   through first production or import of clean fuel for use in this
 7   Commonwealth.
 8      "Deficit."   As follows:
 9          (1)   A quantitative measure of the amount of CO2e that a
10      fuel supplier produced above the carbon intensity target in a
11      given compliance year.
12          (2)   A deficit shall be expressed in metric tons of CO2e.
13          (3)   For a fuel with a carbon intensity above the
14      applicable carbon intensity target, a deficit shall be
15      calculated by multiplying the difference between the carbon
16      intensity of the fuel and the applicable carbon intensity
17      target in a given compliance year and the amount in
18      megajoules of that fuel used in this Commonwealth.
19      "Deliverable fuel."   A liquid fuel or gaseous fuel used for
20   the purpose of transportation fuel or heating fuel conveyed by a
21   vehicle from a wholesaler or to an end user of the product.
22      "Department."    The Department of Environmental Protection of
23   the Commonwealth.
24      "Fuel."   A transportation fuel, including aviation fuel, or a
25   heating fuel.
26      "Fuel pathway."   A detailed description of all stages of a
27   fuel's production and delivery for use, including feedstock
28   generation, production, distribution and combustion or use by
29   the consumer that is used to calculate the life-cycle emissions
30   of a fuel.

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 1      "Fuel supplier."    An entity that produces or imports a fuel
 2   for use in this Commonwealth.
 3      "GREET model."    The Research and Development Greenhouse
 4   Gases, Regulated Emissions and Energy Use in Technologies model
 5   developed by the Argonne National Laboratory as of the effective
 6   date of this definition, including any subsequent versions
 7   adopted by the Argonne National Laboratory that are then adopted
 8   by the board in accordance with this act.
 9      "Heating fuel."    A fuel used to heat the interior space of a
10   building.
11      "Heating fuel baseline."     The petroleum-only portion of the
12   aggregate average carbon intensity of heating fuel supplied to
13   and used in this Commonwealth in 2005.
14      "Hythane."   Any combination of compressed natural gas and
15   hydrogen.
16      "Life-cycle emissions."    The total aggregate greenhouse gas
17   emissions resulting from all stages of a fuel pathway, expressed
18   as gCO2e, for a specific fuel.
19      "Motor vehicle."    As defined in 75 Pa.C.S. § 102 (relating to
20   definitions).
21      "Obligated party."    A fuel supplier that generates deficits
22   through first production or import of a fuel for use in this
23   Commonwealth.
24      "Program participant."    An obligated party or a credit
25   generator that, on a mandatory or an opt-in basis, abides by the
26   requirements of this act.
27      "Project credit."    A credit generated from a project at a
28   refinery, hydrogen production facility supplying a refinery,
29   crude oil production facility or natural gas production facility
30   associated with the production of transportation fuels and

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 1   heating fuels supplied to and used in this Commonwealth that
 2   reduce the carbon intensity of a fuel compared to the
 3   transportation fuel baseline and heating fuel baseline
 4   established in accordance with this act.
 5      "Project operator."    A program participant that generates
 6   project credits through eligible projects in accordance with
 7   this act.
 8      "Secretary."     The Secretary of Environmental Protection of
 9   the Commonwealth.
10      "Sustainable aviation fuel."     A liquid transportation fuel
11   that:
12           (1)   is derived from biomass, waste streams, renewable
13      energy sources or gaseous carbon oxides;
14           (2)   consists of synthesized hydrocarbons; and
15           (3)   meets the requirements of ASTM D7566 or the co-
16      processing provisions of ASTM D1655.
17      "Technology neutral."     Not giving preference to one
18   technology, feedstock or fuel production or process pathway over
19   another.
20      "Trading program."    The Fair Market Credit Trading Program
21   established under section 701(a).
22      "Transportation fuel."     As follows:
23           (1)   Any source of energy used for the operation of a
24      motor vehicle in this Commonwealth that meets applicable
25      standards and specifications.
26           (2)   The term includes sustainable aviation fuel.
27      "Transportation fuel baseline."      The petroleum-only portion
28   of the aggregate average carbon intensity of on-road gasoline
29   and diesel fuel supplied to and used in this Commonwealth in
30   2005.

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 1      "Verifier."        An independent third party accredited by the
 2   department to carry out the duties described in section 703(e).
 3                                    CHAPTER 3
 4                           CLEAN FUELS STANDARDS BOARD
 5   Section 301.     Establishment.
 6      The Clean Fuels Standards Board is established within the
 7   department.
 8   Section 302.     Composition.
 9      (a)     Members.--The board shall consist of the following
10   members:
11            (1)   The secretary or a designee of the secretary who
12      shall be an employee of the department.
13            (2)   The Secretary of Agriculture or a designee of the
14      Secretary of Agriculture who shall be an employee of the
15      Department of Agriculture.
16            (3)   The Secretary of Revenue or a designee of the
17      Secretary of Revenue who shall be an employee of the
18      Department of Revenue.
19            (4)   The Secretary of Transportation or a designee of the
20      Secretary of Transportation who shall be an employee of the
21      Department of Transportation.
22            (5)   The chairperson of the Pennsylvania Public Utility
23      Commission or a designee of the chairperson of the
24      Pennsylvania Public Utility Commission who shall be a
25      commissioner of the Pennsylvania Public Utility Commission.
26            (6)   The following individuals appointed in accordance
27      with subsection (b):
28                  (i)    A producer of petroleum-based diesel fuel within
29            this Commonwealth.
30                  (ii)    A producer of petroleum-based diesel fuel

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 1            outside this Commonwealth.
 2                  (iii)    A producer of petroleum-based gasoline within
 3            this Commonwealth.
 4                  (iv)    A producer of petroleum-based gasoline outside
 5            this Commonwealth.
 6                  (v)    Two producers of renewable natural gas within
 7            this Commonwealth.
 8                  (vi)    Two producers or suppliers of renewable diesel
 9            fuel within this Commonwealth.
10                  (vii)    Two producers or suppliers of renewable
11            propane within this Commonwealth.
12                  (viii)    An electric utility headquartered in this
13            Commonwealth.
14                  (ix)    A natural gas utility headquartered in this
15            Commonwealth.
16                  (x)    A distributor of deliverable fuels that is not
17            an obligated party.
18                  (xi)    A representative of a consumer organization
19            that represents residential consumers.
20                  (xii)    A representative of a consumer organization
21            that represents industrial and commercial consumers.
22                  (xiii)    A representative of an environmental
23            organization.
24      (b)   Appointments.--The members of the board enumerated under
25   subsection (a)(6) shall be appointed as follows, after
26   consultation and coordination:
27            (1)   The President pro tempore of the Senate shall
28      appoint five members.
29            (2)   The Speaker of the House of Representatives shall
30      appoint five members.

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 1            (3)   The Minority Leader of the Senate shall appoint
 2      three members.
 3            (4)   The Minority Leader of the House of Representatives
 4      shall appoint three members.
 5   Section 303.    Terms.
 6      (a)   Three-year term.--Subject to subsection (b), a member of
 7   the board appointed under section 302(a)(6) shall serve a term
 8   of three years and until a successor of the member is appointed.
 9      (b)   Limitation.--A member of the board appointed under
10   section 302(a)(6) may only be appointed to three three-year
11   terms.
12   Section 304.    Officers.
13      The members of the board shall select a chairperson and vice
14   chairperson of the board from the members appointed under
15   section 302(a)(6).
16   Section 305.    Quorum and voting.
17      (a)   Quorum.--A majority of the members of the board shall
18   constitute a quorum to conduct official business.
19      (b)   Majority vote.--Action of the board shall be authorized
20   or ratified by a majority vote of the members of the board.
21   Section 306.    Vacancies.
22      (a)   Manner.--A vacancy on the board shall be filled in the
23   same manner as the original appointment.
24      (b)   Term.--A member of the board appointed in accordance
25   with section 302(b)(6) to fill a vacancy on the board shall be
26   appointed for the unexpired term and, subject to section 303(b),
27   may be subsequently appointed to a full term.
28   Section 307.    Compensation and expenses.
29      The members of the board shall not be entitled to
30   compensation for their service as members of the board but shall

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 1   be entitled to reasonable expenses incurred in the performance
 2   of their duties as members of the board.
 3   Section 308.    Proceedings.
 4      The board shall document considerations and dissenting
 5   opinions regarding matters discussed during its meetings.
 6   Section 309.    Transparency.
 7      The proceedings of the board and any information, documents,
 8   materials and copies produced by the board shall be subject to
 9   65 Pa.C.S. Ch. 7 (relating to open meetings) and shall be
10   accessible for inspection and duplication in accordance with the
11   act of February 14, 2008 (P.L.6, No.3), known as the Right-to-
12   Know Law.
13   Section 310.    Powers and duties.
14      The board shall have the following powers and duties:
15          (1)     Promulgate rulemakings necessary to carry out the
16      purposes of this act.
17          (2)     Perform a review of the rulemaking conducted under
18      this act every three years, which shall include:
19                (i)    A review of the economic impact of the clean
20          fuels standards.
21                (ii)    An opinion as to whether the clean fuels
22          standards are adhering to the established carbon
23          intensity targets.
24                (iii)    A recommendation regarding whether the board
25          should consider any adjustment to the carbon intensity
26          targets in accordance with sections 501(d) and 502(c).
27                (iv)    A recommendation regarding the need to update
28          the GREET model used, including the procedures,
29          guidelines and user-friendly interface of the GREET model
30          in accordance with section 504(e).

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 1                  (v)    A recommendation regarding the need to update
 2            any of the ASTM standards used.
 3                  (vi)    A recommendation regarding the need to update
 4            any other standard used under this act to carry out the
 5            purposes of this act.
 6                                    CHAPTER 5
 7                                    STANDARDS
 8   Section 501.     Transportation fuels.
 9      (a)   Establishment of clean fuels standards.--The board shall
10   establish clean fuels standards for transportation fuels that
11   consists of separate carbon intensity targets for aviation fuel,
12   gasoline and diesel fuel.
13      (b)   Carbon intensity targets.--
14            (1)   The carbon intensity targets under the clean fuels
15      standard under this section shall be based on the baseline
16      carbon intensity values calculated in accordance with section
17      504(b).
18            (2)   The carbon intensity targets under the clean fuels
19      standard for gasoline and diesel fuel shall:
20                  (i)    Decrease each year to meet the overall level
21            described in subparagraph (ii).
22                  (ii)    Require that the aggregate carbon intensity of
23            gasoline and diesel fuel used in this Commonwealth be
24            reduced to 15% below the transportation fuel baseline no
25            later than 10 years following the rulemaking initially
26            conducted in accordance with section 901.
27      (c)   Aviation fuel.--The clean fuels standard for aviation
28   fuel:
29            (1)   Shall only be used to calculate the credits that a
30      fuel supplier of sustainable aviation fuel accrues when the

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 1    fuel supplier opts in to abide by the requirements of this
 2    act.
 3           (2)   Shall not be subject to the carbon intensity targets
 4    described under subsection (b)(2).
 5    (d)    Review and adjustment.--
 6           (1)   The board may adjust the clean fuels standard under
 7    this section only as provided in this subsection.
 8           (2)   No later than three years following the
 9    establishment of the clean fuels standard under this section,
10    and every three years thereafter, the board, in coordination
11    with the department, shall:
12                 (i)    Review the clean fuels standard.
13                 (ii)    Determine the extent to which the target
14           reductions specified under the clean fuels standard have
15           been met.
16                 (iii)    Determine whether any adjustment is necessary
17           to achieve the target reductions under the clean fuels
18           standard, taking into consideration:
19                        (A)   Technologies available to achieve the clean
20                 fuels standard.
21                        (B)   The need to maintain transportation fuel
22                 quality and availability.
23           (3)   Upon making any adjustment to the clean fuels
24    standard under this section, the board shall transmit notice
25    of the adjustment to the Legislative Reference Bureau for
26    publication in the next available issue of the Pennsylvania
27    Bulletin.
28           (4)   An adjustment to the clean fuels standard under this
29    section shall be effective upon publication of the notice
30    under paragraph (3) and in accordance with section 901.

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 1   Section 502.     Heating fuels.
 2      (a)   Establishment of clean fuels standard.-The board shall
 3   establish a clean fuels standard for heating fuels.
 4      (b)   Carbon intensity targets.--
 5            (1)   The carbon intensity targets under the clean fuels
 6      standard under this section shall be based on the baseline
 7      carbon intensity values calculated in accordance with section
 8      504(b).
 9            (2)   The carbon intensity targets under the clean fuels
10      standard for heating fuels shall:
11                  (i)    Decrease each year to meet the overall level
12            described in subparagraph (ii).
13                  (ii)    Require that the aggregate carbon intensity of
14            heating fuels used in this Commonwealth be reduced to 15%
15            below the heating fuel baseline no later than 10 years
16            following the final adoption of the rulemaking initially
17            conducted in accordance with this act.
18      (c)   Review and adjustment.--
19            (1)   The board may adjust the clean fuels standard under
20      this section only as provided in this subsection.
21            (2)   No later than three years following the
22      establishment of the clean fuels standard under this section,
23      and every three years thereafter, the board, in coordination
24      with the department, shall:
25                  (i)    Review the clean fuels standard.
26                  (ii)    Determine the extent to which the target
27            reductions specified under the clean fuels standard have
28            been met.
29                  (iii)    Determine whether any adjustment is necessary
30            to achieve the target reductions under the clean fuels

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 1            standard, taking into consideration:
 2                      (A)   Technologies available to achieve the clean
 3                  fuels standard.
 4                      (B)   The need to maintain heating fuel quality
 5                  and availability.
 6            (3)   Upon making any adjustment to the clean fuels
 7      standard under this section, the board shall transmit notice
 8      of the adjustment to the Legislative Reference Bureau for
 9      publication in the next available issue of the Pennsylvania
10      Bulletin.
11            (4)   An adjustment to the clean fuels standard under this
12      section shall be effective upon publication of the notice
13      under paragraph (3).
14   Section 503.     Implementation.
15      (a)   Postponement prohibited.--Neither the board nor the
16   department may postpone any provision of this act except as
17   provided in this act.
18      (b)   Rulemaking.--The clean fuels standards for
19   transportation fuels and heating fuels shall be established
20   through rulemaking developed by the board and officially
21   promulgated in accordance with the act of June 25, 1982
22   (P.L.633, No.181), known as the Regulatory Review Act.
23   Section 504.     GREET model and carbon intensity.
24      (a)   Use of GREET model generally.--
25            (1)   Carbon intensity values for transportation fuels and
26      heating fuels shall be calculated using the GREET model.
27            (2)   The same version of the GREET model shall be used to
28      calculate carbon intensity values for transportation fuels
29      and heating fuels.
30            (3)   The version of the GREET model may only be updated

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 1    during the designated review periods in accordance with
 2    subsection (e).
 3    (b)   Baseline carbon intensity values.--
 4          (1)    The board shall calculate the baseline carbon
 5    intensity values of gasoline, diesel fuel and aviation fuel
 6    supplied for use in this Commonwealth in 2005, using the
 7    default input data from the GREET model, including
 8    representative United States average values for the use of
 9    on-road gasoline and diesel fuel and aviation fuel.
10          (2)    The baseline carbon intensity values under paragraph
11    (1) shall:
12                 (i)    Be used to determine the carbon intensity
13          targets set by the clean fuels standard under section
14          501.
15                 (ii)    Remain unchanged even if there are updates to
16          the GREET model.
17    (c)   Default carbon intensity values.--
18          (1)    The board shall calculate the default carbon
19    intensity values for fuels, using the default values in the
20    GREET model for key methodology choices and assumptions,
21    including, but not limited to, the following:
22                 (i)    Yields.
23                 (ii)    Process input quantities.
24                 (iii)    Energy input quantities.
25                 (iv)    Chemical and co-product allocations.
26                 (v)    Indirect land use change.
27                 (vi)    Carbon capture and storage.
28          (2)    The default carbon intensity values may be updated
29    only during designated review periods in accordance with
30    subsection (e).

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 1    (d)   Fuel pathway application.--
 2          (1)   A program participant may request a carbon intensity
 3    value for a specific fuel pathway, by providing input data
 4    representative of the actual operations of the program
 5    participant, which may be different from the default values
 6    in the GREET model for key methodology choices and
 7    assumptions, including, but not limited to, the following:
 8                (i)    Yields.
 9                (ii)    Process input quantities.
10                (iii)    Energy input quantities.
11                (iv)    Chemical and fertilizer input quantities.
12                (v)    Lower emission factor alternatives for feedstock
13          and fuel production, including, but not limited to, the
14          following:
15                       (A)   Renewable natural gas.
16                       (B)   Renewable diesel fuel.
17                       (C)   Carbon capture and sequestration.
18                       (D)   Lower carbon intensity hydrogen.
19          (2)   The board shall verify and approve the request for a
20    carbon intensity value for a specific fuel pathway by program
21    participants under paragraph (1).
22          (3)   The department, as directed by the board, shall
23    develop procedures, guidelines and a user-friendly interface
24    with the GREET model, in consultation with experts from the
25    Argonne National Laboratory, for program participants to use
26    to provide the input data under paragraph (1).
27          (4)   The use of carbon intensity values calculated for
28    fuel pathways using an immediate previous version of the
29    GREET model shall be permitted for a 12-month period if,
30    during the designated review periods under subsection (e),

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 1    the board adopts the most recent GREET model consistent with
 2    this act.
 3          (5)    A third-party verification and certification shall
 4    be used by the board for each fuel pathway application of a
 5    program participant in order to verify and approve the
 6    pathways under paragraph (2).
 7    (e)   Review and adjustment.--
 8          (1)    No later than three years following the
 9    establishment of the clean fuels standards in accordance with
10    sections 501 and 502, and every three years thereafter, the
11    board, in coordination with the department, shall review the
12    GREET model used to calculate the carbon intensity values
13    under this section.
14          (2)    If the GREET model has changed since the last review
15    period, the board shall:
16                 (i)    Issue a recommendation to update the GREET model
17          used to calculate carbon intensity values to the newest
18          version of the GREET model in accordance with section
19          901.
20                 (ii)    Adjust the default carbon intensity values
21          calculated in accordance with subsection (c) using the
22          updated version of the GREET model.
23                 (iii)    Use the updated version of the GREET model for
24          future fuel pathway applications.
25                 (iv)    Direct the department to update the procedures,
26          guidelines and the user-friendly interface with the GREET
27          model for program participants to provide the input data
28          in accordance with subsection (d).
29                 (v)    Permit the continued use of carbon intensity
30          values for fuel pathways using the immediate previous

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 1            version of the GREET model for a 12-month period.
 2            (3)   The board shall transmit notice of each adjustment
 3      made under paragraph (2) to the Legislative Reference Bureau
 4      for publication in the next available issue of the
 5      Pennsylvania Bulletin.
 6            (4)   An adjustment under this subsection shall be
 7      effective upon publication of the notice under paragraph (3).
 8   Section 505.    Exemptions and eligibility.
 9      (a)   Exemptions.--Subject to subsection (b), the following
10   fuels are exempt from the clean fuels standards under sections
11   501 and 502:
12            (1)   Aviation fuel.
13            (2)   Transportation fuel used in locomotives.
14            (3)   Transportation fuel used in watercrafts.
15            (4)   Transportation fuel used in off-road applications,
16      including mining and agriculture.
17            (5)   Fuel used in military tactical vehicles and tactical
18      support equipment owned by the United States Department of
19      Defense or the United States Armed Forces that could be used
20      as transportation fuel.
21      (b)   Eligibility.--Fuel suppliers of the fuels described in
22   subsection (a) for use in this Commonwealth, if deemed to be
23   clean fuels, including sustainable aviation fuel, shall be
24   eligible to receive credits on an opt-in basis that may be
25   applied to future compliance years or sold to obligated parties
26   in accordance with section 703(c).
27                                   CHAPTER 7
28                     FAIR MARKET CREDIT TRADING PROGRAM
29   Section 701.    Establishment.
30      (a)   Authorization.--The Fair Market Credit Trading Program

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 1   is established in the department.
 2      (b)   Implementation.--The department may retain an
 3   independent third party to implement the trading program.
 4   Section 702.     Components.
 5      The trading program shall include:
 6            (1)   Cost-containment measures, including a pricing cap
 7      and a credit clearance market.
 8            (2)   A mechanism to enable credits to be bought and sold
 9      among obligated parties and credit generators.
10            (3)   The ability to use indirect accounting methods,
11      including mass balancing or book and claim for clean fuels or
12      feedstocks for the production of clean fuels entering
13      fungible supply systems that can access this Commonwealth
14      under the established requirements.
15            (4)   The ability to bank credits for future compliance
16      years and hold credits for a period not exceeding five years.
17            (5)   Procedures for verifying the validity of credits and
18      deficits.
19   Section 703.     Participation.
20      (a)   Registration.--
21            (1)   To participate in the trading program, a program
22      participant must register with the department by submitting:
23                  (i)    An application on a form and in the manner
24            prescribed by the board.
25                  (ii)    The annual fee, as the board prescribes, which
26            shall only be sufficient enough to cover the costs of the
27            administration and enforcement of this act.
28            (2)   The initial period to register in accordance with
29      paragraph (1) shall be at least 12 months following the
30      publication of the final rulemaking establishing the clean

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 1      fuels standards for transportation fuels and heating fuels.
 2             (3)   During the initial 12-month period, obligated
 3      parties shall not incur any deficits.
 4      (b)    Balancing credits and deficits.--After the initial 12-
 5   month registration period described in subsection (a), an
 6   obligated party shall demonstrate compliance with the applicable
 7   clean fuels standards by balancing credits and deficits, through
 8   obtaining and retiring credits, on an annual basis, as
 9   prescribed by the board.
10      (c)    Credits.--
11             (1)   The mechanism for the generation of credits under
12      the trading program shall be technology neutral.
13             (2)   Credit opportunities may not be expressly excluded.
14             (3)   Credit and deficit generation shall be based only on
15      life-cycle emissions using emission calculation methods in
16      accordance with this act. Any multipliers or adjustments for
17      credits or deficits that are inherently not technology
18      neutral may not be used.
19             (4)   A project operator may generate project credits,
20      which may be used to offset deficits.
21             (5)   The department shall allow the generation of
22      credits, for use in future compliance years, during the
23      initial 12-month registration period described in subsection
24      (a).
25      (d)    Deficits.--After the end of the registration period
26   described in subsection (a), obligated parties shall begin
27   generating deficits under the clean fuels standards.
28      (e)    Third-party verifications.--
29             (1)   The department shall implement and administer a
30      verification process, to be used by an independent third

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 1      party designated by the department, to determine the
 2      following on an annual basis:
 3                  (i)    Compliance with the applicable clean fuels
 4            standards under sections 501 and 502.
 5                  (ii)    Credit generation under this section.
 6            (2)   The department shall require third-party
 7      verification of fuel pathway applications.
 8            (3)   The department shall develop an accreditation
 9      process for a designated independent third party to be a
10      verifier, which must permit the use of verification entities
11      accredited by another state that has adopted a clean fuels
12      standard.
13      (f)   Opt-in participation.--Clean fuel versions of exempt
14   fuels under section 505(a), including sustainable aviation fuel,
15   are eligible to generate credits on an opt-in basis.
16                                    CHAPTER 9
17                             MISCELLANEOUS PROVISIONS
18   Section 901.     Rulemaking.
19      (a)   Contents.--The board shall promulgate any rulemaking
20   necessary to implement, administer and enforce the provisions of
21   this act, including:
22            (1)   The establishment of baseline carbon intensity
23      values in accordance with section 504(b).
24            (2)   The establishment of an annual reduction in carbon
25      intensity targets from the transportation fuel and heating
26      fuel sectors to meet the overall carbon intensity targets in
27      accordance with sections 501 and 502.
28            (3)   The use of the GREET model to determine the default
29      carbon intensity for fuels while facilitating an orderly
30      transition between any model updates in accordance with

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 1    section 504(c) and (e).
 2        (4)    The use of the GREET model to determine the carbon
 3    intensity for fuels based on input data provided by a program
 4    participant in accordance with section 504(d).
 5        (5)    The establishment of a process for fuel pathway
 6    application for fuels in accordance with section 504(d).
 7        (6)    The establishment of a process for obligated parties
 8    to comply with the clean fuels standards by obtaining and
 9    retiring credits in accordance with section 703.
10        (7)    The establishment of a technology-neutral mechanism
11    for the generation of credits in accordance with section
12    703(c).
13        (8)    The establishment of a process to allow a project
14    operator to generate project credits in accordance with
15    section 703(c).
16        (9)    The establishment of a process to recognize
17    voluntary on-farm emissions reductions that contribute to the
18    reduced carbon intensity of fuels.
19        (10)   The enabling of clean fuel versions of exempt fuels
20    under section 505(a), including sustainable aviation fuel, to
21    be eligible to generate credits on an opt-in basis in
22    accordance with section 703(f).
23        (11)   The registration of program participants.
24        (12)   The establishment of an annual fee for program
25    participants in accordance with section 703.
26        (13)   After the initial 12-month registration period
27    described in section 703(a), requiring obligated parties to
28    demonstrate compliance with the clean fuels standards by
29    balancing credits and deficits on an annual basis in
30    accordance with section 703.

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 1            (14)    The establishment of the trading program in
 2      accordance with section 701.
 3            (15)    Third-party certifications of fuel pathway
 4      applications under section 504(d)(5).
 5            (16)    Third-party verifications under section 703(e)(1).
 6            (17)    The accreditation process under section 703(e)(3).
 7      (b)   Temporary regulations.--
 8            (1)    To facilitate the prompt implementation of this act,
 9      the board shall promulgate temporary regulations that shall
10      expire no later than two years following the publication of
11      the temporary regulations.
12            (2)    The temporary regulations under this subsection
13      shall not be subject to:
14                   (i)     Section 612 of the act of April 9, 1929
15            (P.L.177, No.175), known as The Administrative Code of
16            1929.
17                   (ii)    Sections 201, 202, 203, 204 and 205 of the act
18            of July 31, 1968 (P.L.769, No.240), referred to as the
19            Commonwealth Documents Law.
20                   (iii)    Sections 204(b) and 301(10) of the act of
21            October 15, 1980 (P.L.950, 164), known as the
22            Commonwealth Attorneys Act.
23                   (iv)    The act of June 25, 1982 (P.L.633, No.181),
24            known as the Regulatory Review Act.
25            (3)     The board's authority to adopt temporary regulations
26      under this subsection shall expire two years after the
27      effective date of this paragraph. Rulemaking adopted after
28      this period shall be promulgated as provided by law.
29   Section 902.      Reports.
30      The department shall issue a report to the General Assembly

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 1   on an annual basis that:
 2            (1)   Details the progress of the initial rulemaking
 3      process. Subsequent reports to the General Assembly shall
 4      provide details of any rulemaking changes by the board that
 5      are undertaken or that have been promulgated after the most
 6      recent prior report.
 7            (2)   Assesses the availability and forecast of fuels in
 8      this Commonwealth.
 9            (3)   Assesses the status of clean fuel production in this
10      Commonwealth.
11            (4)   Assesses the reduction in carbon intensity from the
12      transportation fuel and heating fuel sectors.
13            (5)   Assesses the economic impact of this act in this
14      Commonwealth.
15   Section 903.    Co-compliance.
16      A clean fuel that is used to generate credits under this act
17   as prescribed may also generate credits under any overlapping
18   Federal or State program, including, but not limited to,
19   Renewable Identification Numbers under the United States
20   Renewable Fuel Standard.
21   Section 904.    Compliance waiver.
22      (a)   Authorization.--The secretary may waive all obligations
23   under this act for one compliance year if any of the following
24   apply:
25            (1)   A declaration of disaster emergency is issued by the
26      Governor in accordance with 35 Pa.C.S. § 7301(c) (relating to
27      general authority of Governor).
28            (2)   The board finds, and transmits notice of the finding
29      to the Legislative Reference Bureau for publication in the
30      next available issue of the Pennsylvania Bulletin, based on

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 1      the reports described in section 902, that a fuel supply
 2      shortage exists or may exist in this Commonwealth and the
 3      fuel supply shortage:
 4                 (i)    is, or is likely to be, of significant scope and
 5            duration, and of an emergency nature; and
 6                 (ii)   causes, or may cause, a major adverse impact on
 7            public health, safety or welfare or on the economy.
 8      (b)     Application.--If the secretary issues a waiver order
 9   under this section, the waiver order shall apply to all
10   obligated parties.
11      (c)     Termination.--After the termination of a waiver order
12   under this section, the schedule of carbon intensity targets as
13   established by the clean fuels standards under this act of the
14   next compliance year, and all subsequent years, shall remain in
15   effect without adjustment.
16   Section 905.    Preemption.
17      (a)     Act of General Assembly.--An act of the General Assembly
18   in effect prior to, on or after the effective date of this
19   subsection shall not preempt the utilization of any
20   transportation fuel or heating fuel.
21      (b)     Political subdivision.--A political subdivision shall
22   not adopt or enforce any ordinance, regulation or resolution
23   that may preempt the utilization of any transportation fuel or
24   heating fuel.
25      (c)     Transportation fuels.--The provisions of this act, in
26   relation to transportation fuels, shall be preempted if a
27   Federal clean fuels standard for transportation fuels is
28   enacted.
29      (d)     Heating fuels.--The provisions of this act, in relation
30   to heating fuels, shall be preempted if a Federal clean fuels

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 1   standard for heating fuels is enacted.
 2   Section 906.    Effective date.
 3      This act shall take effect as follows:
 4          (1)     The following shall take effect in 60 days:
 5                Chapter 1.
 6                Section 901.
 7          (2)     This section shall take effect immediately.
 8          (3)     The remainder of this act shall take effect upon the
 9      publication of the temporary regulations in accordance with
10      section 901(b).




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